Implications of Jarkesy v. SEC: Fifth Circuit Upholds Right to Jury Trial, Raises Red Flags about Administrative State

On May 18, the Fifth Circuit issued an opinion vacating a Securities and Exchange Commission administrative law judge’s decision that George Jarkesy Jr. and his investment adviser Patriot28 committed securities fraud. The court, in an opinion authored by Judge Jennifer Elrod, held that:

(1) the SEC’s in-house adjudication of Petitioners’ case violated their Seventh Amendment right to a jury trial; (2) Congress unconstitutionally delegated legislative power to the SEC by failing to provide an intelligible principle by which the SEC would exercise the delegated power, in violation of Article I’s vesting of “all” legislative power in Congress; and (3) statutory removal restrictions on SEC ALJs violate the Take Care Clause of Article II.